Distinguish between a trade discount and a cash discount

Assignment Help Accounting Basics

Reference no: EM132687863

On January 1, 2012, Wellness Enterprises had the following balances: cash at bank $85,000; Cash in Hand $25,000.

The following transactions took place during the month of January:

Jan. 2 Purchased equipment on credit from Do It Center with cheque for $50,000.

Jan. 4 Purchased goods from Bargains Ltd $42,000 paying by cheque

Jan. 4 Sold goods on credit to T. Pink $25,000

Jan. 5 T. Pink paid her account by cheque receiving 5% cash discount

Jan. 10 Paid Motor expenses by cash $1,500

Jan. 11 Sold goods on credit to A. White $60,000

Jan. 14 Cashed a cheque for $15,000 to cover expenses in the business.

Jan. 14 Paid wages $10,000 cash

Jan. 19 Received payment on account of $60,000 from A. White by cheque less 2.5% cash discount

Jan. 20 Purchased goods from G. Green $40,000 paying by cheque

Jan. 25 Purchased machinery paying by cheque $12,000

Jan. 25 Purchased goods on credit from J. Burgundy $75,000

Jan. 25 Sold goods on credit to B. Brown $55,000

Jan. 26 Received cheque from B. Brown Ltd. $55,000

Jan. 27 Settled J. Burgundy's account in full paying by cheque less 10% cash Discount.

Jan. 29 Paid Wages by cash $1,500.

Jan. 30 Cheque received from B. Brown returned marked 'refer to drawer: insufficient funds

Jan. 30 Received a loan from P. John $60,000?by cheque

Required

Problem a. Prepare a cash book for the month of January.

Problem b. Distinguish between a trade discount and a cash discount.

Reference no: EM132687863

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